Summary
Highlights
Accounting is as old as mankind, with early forms believed to be used by God for creation and Noah for animal accounting. Ancient civilizations like Mesopotamia used systems involving writing and counting money, with evidence like the 'bulla' for record-keeping. The Roman Empire, under Emperor Augustus, kept detailed financial information, including the 'rationarium' for public revenues. The most significant development was Luca Pacioli's double-entry bookkeeping in the 14th century, earning him the title 'father of modern accounting'.
There are four main areas of specialization in accounting. Public accounting involves individual practitioners, firms, and organizations offering independent financial services like assurance, auditing, taxation, and management advisory services to the public for a fee. Private accounting comprises individuals employed by business enterprises on a salary basis to assist management in planning and controlling operations. Government accounting involves accountants in various government branches, focusing on the custody and administration of public funds. Accounting education consists of CPAs who are professors, tasked with preparing future accountants through curriculum development and teaching.
Financial accounting focuses on recording transactions, preparing financial statements, and communicating information to external users, providing general-purpose reports. It is historical in nature and adheres to Generally Accepted Accounting Principles (GAAP). Management accounting, on the other hand, deals with the accumulation and communication of information for internal parties and management decision-making. It is future-oriented, prepares special-purpose reports tailored to management needs, and can use subjective data if relevant for decision-making.
Other branches include Auditing, an examination of financial statements by independent certified public accountants to express an opinion on their fairness. Government Accounting systematically records and reports financial transactions of government offices. Tax Accounting involves preparing tax returns and providing tax advice. Cost Accounting, a subset of management accounting, deals with recording and analyzing manufacturing and other costs for financial reporting and decision-making. Accounting Education develops future accountants, and Accounting Research focuses on new knowledge and the effects of economic events on financial reporting and information.